For many young Americans, the dream of owning a home feels less like a middle-class milestone and more like a prize available only to those with family money or extraordinary incomes.
The monthly mortgage payment on a median-priced home has increased 15% in the last year, while incomes have only increased by 4%. And even if mortgage rates fall in the next year, an increase in activity from buyers striking while the iron is hot would heat up competition and send prices up enough that it will be harder to afford to buy.
“The minute those interest rates come down, all hell’s going to break loose, and the prices are going to go through the roof,” said Barbara Corcoran, the renowned real estate mogul and television personality.
According to Corcoran, buyers will rush off the sidelines if interest rates drop significantly, creating a frenzy that could push prices to record heights.
Corcoran’s bad omen has left some young adults nihilistic about their housing future. Many young adults are nihilistic about their housing future after hearing Corcoran’s bad omen.
There are other options besides postponing or forgoing homeownership. However, there are other options besides postponing or forgoing homeownership.
Here are four compromises to consider to buying before home prices climb further out of reach:
Remote workers, in particular, have an advantage. Working from anywhere gives you the freedom to move to areas where living costs are lower while still maintaining your job. By sharing resources, moving closer to friends or family can increase your wealth in tangible ways. Extended family can help with childcare and a friend can give you a ride to the airport.
Start With An Investment
If you don’t want to live anywhere else, you can still buy without moving. Renting in the desired area while buying an investment property is an affordable option. You can build equity and use it to buy a home that is more expensive in the future. Renting out his El Paso home, Garcia generated rental income, and gained equity. He used this to purchase additional homes including his current Seattle residence. “But I was always interested in building wealth by becoming a homeowner. Then I took a look at my savings that I had accumulated by the age of 31. I identified a market in which I could afford to purchase a rental home and I made it happen. It was a good idea, so I repeated it several times. Now, the results are better than I expected, I have three cash-flowing assets that have appreciated well since I bought them.”
Reevaluate Home Style
If you’ve been priced out of owning your ideal home with a yard, garage and spacious interior, consider a more modest home. Single-family homes typically cost 20% more than townhomes and 29% more than condominiums.
There are upsides to choosing a townhome or a condo. A densely populated area, with parks, transit and restaurants, might provide a more healthy, environmentally friendly lifestyle. And although townhomes and condos don’t typically have private yards or garages, they often come with shared amenities.
Another strategy for affording homeownership is to find a partner to co-own. You and your buying partner could live together as roommates, treat the property as a pure investment, or explore arrangements where one partner pays rent to the other for sole occupancy.
However, if you’re buying a home with someone you’re not married to, it’s imperative to establish a legally binding contract that outlines clear terms for sharing the property and a plan for dissolving the partnership if necessary.
In Conclusion: Stay Flexible
While the road to homeownership may seem steep, it’s not an unattainable dream. These strategies will help aspiring homeowners navigate the market and find a home. It is important to stay flexible, resourceful and knowledgeable so that you can navigate the twists of the housing markets.